Enterprise Blockchain

Enterprise Blockchain

The latest Citizen Cosmos podcast was dedicated to the Kadena project. Serge and his guests Will Martino and Randy Daal discussed L1, multichain and scaling, and many other topics. However, one topic that stands out among the others is the use of blockchain technology, and especially enterprise blockchain. In this article we are going to see the benefits and the use cases of enterprise blockchain.

Blockchain is a technology that competes with the existing way of document management and accepted formats of interaction between counterparties. Only when solving problems, can the blockchain turn into a product. Blockchain is a technology that competes with the existing way of document management. It increases security, efficiency, and transparency across many industries.

Many companies looking at blockchain technologies are interested in adopting its three main features: decentralization, immutability, and cost-effectiveness.

First, let’s talk about decentralization. Most businesses usually use a centralized server that stores all the data for them, thus allowing anyone who needs the information to go through the database with various permission levels. The one and only central server stores and keeps under control access to all the company’s public and private data. Such a state of affairs may create problems if the server stops working due to malfunctioning or a hacker attack. This is where decentralization comes in. In a decentralized network, there is neither a central server nor an authority. If some peer goes offline, several identical peers can still perform the same functions.

The second blockchain benefit is immutability. It basically means that once data or a transaction has entered the blockchain, it can’t be deleted, altered, or destroyed in some other way. In addition, the ledger is transparent, so no one can hide or steal money or use it for unwanted purposes. It is possible due to each grouping of blocks in a blockchain containing a hash of all the data in the preceding blocks. So, with the immutability of blockchain, if anyone tries to sabotage the company’s data, the company would instantly know which data was altered.

Cost-effectiveness speaks for itself and probably needs no explanation. Companies spend vast sums of money yearly to keep up with governmental regulations. For example, KYC requires institutions to update and maintain their identities. With government-maintained blockchain, this expense can be offloaded. Customers could keep updated data on the chain and release it to the facility.

Today, the enterprise is still developing, and many companies join this technology daily. For example, J.P. Morgan, GoldmanSachs, Santander Bank, and other banks have been developing their private blockchains within the last several years. Let’s look at the implementation of enterprise blockchain in the example of Walmart.

The famous American retailer Walmart was one of the first to use blockchain for food products' quality control and traceability. The company first tested the concept by delivering mangoes from Latin America and pork from China. The experience was then transferred to tracking the origin of the greens. The retailer demanded a transition to the blockchain from all greens suppliers after another epidemic of E. coli poisoning in the United States. Walmart used the technology of the IT giant IBM, which launched the IBM Food Trust initiative based on this case. Participation in it provides the following benefits: food safety insurance through traceability of the supply chain and transparency of data on the expiration date, manufacturer, method, and transportation conditions; constant supply chain efficiency improvement through automating processes and collecting big data that helps you find the best logistical paths; increasing consumer trust and loyalty through open access to most of the data in the blockchain, which allows assessing product quality and authenticity; reduction of food waste and spoilage during transport by identifying problem areas that cause the most spoilage; protection against food fraud. Walmart set an example to the global retailing networks, so today, Carrefour, Nestlé, Unilever, and many others either already have their private blockchains or building them right now.

In conclusion, enterprise blockchains unlock the potential of blockchain technology and can provide more ingenious solutions not only to individuals but also to big companies and industries.


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MEV

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MEV

The rapid development of the DeFi sector in crypto finance has brought great opportunities for users to manage their assets. But along with this, new risks arose. One such risk was MEV. This arbitrage strategy allows miners to change the order of transactions in the generated blocks and earn on user transactions. This entails higher fees and network congestion and generally destabilizes the blockchain. And although almost all blockchains are subject to MEV, Ethereum bears the main risks, as it is the most common DeFi protocols using smart contracts.

What is MEV

The architectural features of Ethereum and other blockchains using smart contracts allow you to receive additional income using these same smart contracts and DeFi protocols. Previously, MEV was deciphered as a Miner Extractable Value. Still, after the start of using arbitrage strategies, the decoding of Maximum Extractable Value has been more common recently. MEV is the profit that a miner or validator can make by intentionally changing the order of transactions in a block that is added to the blockchain.

How MEV works

Technically, all transactions of users and traders fall into the mempool. Miners take trades from the mempool, form blocks, and add them to the blockchain. Transactions in the league are not arranged in chronological order but in the order in which the miner added them. Here there are conditions under which the miner, having determined the high-margin transaction of the user or trader, can copy it and paste it into the block so that it is executed first. If the miner did not take advantage of this opportunity, trading bots would come into play. They track a highly profitable transaction, copy, and offer the miner a higher commission for executing the trade in the first place. Since there are a lot of trading bots, an auction begins where the transaction fee rises rapidly.

What are the risks of MEV?

For users, the risk is a possible exchange at a deliberately unfavorable rate and an unreasonable increase in gas fees. MEV is also one of Ethereum's biggest issues, with more than $689 million extracted from users of the network year-to-date. By leveraging their discretionary power to sequence transactions within blocks, miners can extract value from decentralized application users on Ethereum, greatly diminishing the user experience and threatening the stability of the network. Moreover, MEV can have deleterious effects between blocks. If the MEV available in a block significantly exceeds the standard block reward, miners may be incentivized to remine blocks and capture the MEV for themselves, causing blockchain re-organization and consensus instability.

How to fight MEV

Unfortunately, a complete solution does not yet exist. However, the developers see the MEV problem and are working on a solution. At the moment, there are two main approaches to solving the problem. The first one is to create tools that increase the transparency of transactions and provide access to MEV to all users. Theoretically, this should increase competition and minimize the negative impact of MEVs. The second approach assumes that the MEV problem is solvable - it is only necessary to update the rules of the Ethereum network consensus algorithm, release protocols that minimize the opportunities for MEV, and, most importantly, increase the motivation of miners to abandon these strategies.

So far, the crypto community cannot eliminate the opportunities for MEV strategies. But their negative consequences can be significantly minimized. The main thing is that the developers and users of the Ethereum network see the problem and are already taking measures to solve it.


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